Correlation Between Danaher and SPECTRAL MEDICAL

Can any of the company-specific risk be diversified away by investing in both Danaher and SPECTRAL MEDICAL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Danaher and SPECTRAL MEDICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Danaher and SPECTRAL MEDICAL, you can compare the effects of market volatilities on Danaher and SPECTRAL MEDICAL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Danaher with a short position of SPECTRAL MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaher and SPECTRAL MEDICAL.

Diversification Opportunities for Danaher and SPECTRAL MEDICAL

0.47

Correlation Coefficient

Danaher  SPECTRAL MEDICAL

Very weak diversification

The 3 months correlation between Danaher and SPECTRAL is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and SPECTRAL MEDICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPECTRAL MEDICAL and Danaher is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Danaher are associated (or correlated) with SPECTRAL MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPECTRAL MEDICAL has no effect on the direction of Danaher i.e., Danaher and SPECTRAL MEDICAL go up and down completely randomly.

Pair Corralation between Danaher and SPECTRAL MEDICAL

Assuming the 90 days trading horizon Danaher is expected to generate 0.41 times more return on investment than SPECTRAL MEDICAL. However, Danaher is 2.42 times less risky than SPECTRAL MEDICAL. It trades about 0.24 of its potential returns per unit of risk. SPECTRAL MEDICAL is currently generating about 0.02 per unit of risk. If you would invest  22,275  in Danaher on October 25, 2024 and sell it today you would earn a total of  1,330  from holding Danaher or generate 5.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Danaher  vs.  SPECTRAL MEDICAL

Danaher

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Danaher is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SPECTRAL MEDICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPECTRAL MEDICAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Danaher and SPECTRAL MEDICAL

The main advantage of trading using opposite Danaher and SPECTRAL MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher position performs unexpectedly, SPECTRAL MEDICAL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPECTRAL MEDICAL will offset losses from the drop in SPECTRAL MEDICAL's long position.

The idea behind Danaher and SPECTRAL MEDICAL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.